OCTOBER 15, 2013

For years, General Motors pounded out hoods, fenders and doors for its Tahoe and Yukon SUVs at plants in Ohio and Michigan and shipped them to its assembly plant in Arlington, Texas.Yesterday, reports The Wall Street Journal (Oct. 14, 2013), the auto maker officially opened a $200 million metal-stamping plant adjacent to the Arlington factory that reduces that travel to about 20 feet from machine to welder.Estimated savings: about $40 million a year in shipping costs.

The new plant, is part of a broader rethinking of logistics by GM CEO Dan Akerson to generate hundreds of million of dollars in new profit. “Any savings I can get by cutting my logistics bill goes right to my bottom line and makes us more competitive,” says Akerson.  GM now sees logistics as representing the biggest potential opportunity to squeeze new profit from operations.

Co-locating parts-making and auto assembly promise higher quality and greater profit. GM and other auto makers say they can no longer put up with parts that arrive scratched or dented and have to be repaired.  “Now, with the reset of labor costs, especially in the U.S., more efficiency in the plants and the importance of quality, we can finally evolve,” adds the CEO of GM’s largest parts supplier.

“The best way to describe logistics is waste,” says GM’s manufacturing chief. “It is moving productive materials from point A to point B. It has no value and guess what; it doesn’t mean anything to the customer. If you can squeeze that waste of the system then you can tactically improve your profit margins.” In addition to moving its own production, GM is encouraging parts makers to move or build new facilities closer to GM assembly plants.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

SEPTEMBER 23, 2013

The old textile mills in the Carolinas are mostly gone now. Gaffney Manufacturing, National Textiles, Cherokee — clangorous, dusty, productive engines of the Carolinas fabric trade — fell one by one to the forces of globalization. Just as the Carolinas benefited when manufacturing migrated first from England to New England and then to here, where labor was even cheaper, they suffered in the 1990s when the textile industry mostly left the US. It headed to China, India, Mexico — wherever people would spool, spin and sew for a few dollars or less a day.

But remarkably, Parkdale Mills, the country’s largest buyer of raw cotton, has reopened and is thriving–another indication of the resurgence of US manufacturing, reports The New York Times (Sept. 20, 2013) in its cover story. For example, just last year, clothing maker American Giant was buying fabric from a factory in India. Now, it is cheaper to shop in the US, using Parkdale yarn.

American manufacturing has several advantages over outsourcing. Transportation costs are a fraction of what they are overseas. Turnaround time is quicker. Most striking, labor costs aren’t that much higher than overseas because the factories that survived the outsourcing wave have turned to automation and are employing far fewer workers. Further, monitoring worker safety in places like Bangladesh, has become a huge challenge.

In 2012, textile exports were $22.7 billion, up 37% from just 3 years earlier. That the industry is thriving again is indicative of a broader reassessment by companies about manufacturing in the US. A recent M.I.T. survey found that 1/3 of American companies with manufacturing overseas said they were considering backsourcing some production, while 15% said they had already decided to do so. This means jobs–but on nowhere near the scale there was before, because machines have replaced humans at almost every point in the production process. Take Parkdale: The mill produces 2.5 million pounds of yarn a week with about 140 workers. In 1980, that production level would have required more than 2,000 people.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.